Wednesday, February 24, 2010

US/Washington/POLITICS 02.24.10

· “Volcker Rules” to be watered down in the Senate – WSJ article Wed morning (recall the same article was in the NY Post; the White House said mid-day on Tues that it remained committed to Volcker’s proposal, but it appears like the plan doesn’t have momentum in the Senate). The Journal sounds similar to the Post’s story. Sen Banking Committee Chairman Dodd will unveil a plan that would grant regulators the ability to limit and potentially bad prop trading at banks although will stop short of imposing an outright ban. Under the proposal, regulators would examine banks on a case-by-case basis and would be able to direct them to limit or halt certain activities they felt were a systemic risk. WSJ

· “Volcker Rules” – article #2 this morning – Bloomberg is reporting that Geithner may grant regulators discretion and leeway when implementing “Volcker” trading limits. Treasury officials and other regulators say the law needs to be modified so as to not impair the $7T+ Treasury trading market – Bloomberg

· “Volcker Rules” article #3 this morning – Sen Shelby backs away - "Sen. Shelby supports the spirit of the Volcker rule -- limiting risk to financial institutions and the taxpayer through excessive risk taking -- but is not convinced that the proposal itself is necessary," Shelby's office said in a statement. NY Post.

· Bank fees - House Ways and Means Committee Democrats are mulling over their options on how to implement the White House’s proposed “financial crisis responsibility fee” aimed at recouping taxpayer losses from last year’s bailouts. Republicans think it would be politically advantageous to oppose such a fee. Politico.

· Short selling – majority of the SEC’s 5 commissioners will vote today to temporarily restrict short sales of a co’s stock once it falls 10%. When the 10 percent threshold is triggered, traders could only execute short sales for the stock at a price above the market’s best bid – Bloomberg

· Health Care – the Obama HC proposal faces challenges in the House – the planned, as outlined Mon by the president, is encountering resistance in the House. "We may not be able to do all. I hope we can do all," said House Majority Leader Steny Hoyer (D., Md.). He still voiced strong support for action on a "comprehensive piece of legislation" that expands health care to most Americans but added, "Having said that…if you can't do a whole, doing part is also good." WSJ

· Pelosi Selling Obama Plan - House Democratic leaders launched a massive marketing campaign for President Barack Obama’s $950 billion health care bill to their Caucus on Tuesday, painting it as a big win even though it omits a public insurance option and still includes a tax on high-cost health plans.

· Health Care – Dems more confident to pass via reconciliation - Party lawmakers, energized by President Obama's blueprint and summit plans, are getting behind the strategy of passing the Senate's bill and using budget reconciliation to prevent a GOP filibuster – LA Times.

· Senate Dems warm to reconciliation – the idea gaining acceptance among moderate Democrats who have resisted the strategy but now say GOP opposition may force their hands. Politico.

· Obama health care proposal would introduce new “investment” tax – the plan would for the first time apply the 2.9% Medicare payroll tax to "interest, dividends, annuities, royalties and rents," so-called passive income that we are told includes capital gains, though the latter wasn't explicitly mentioned in the proposal. WSJ

· Health Care – Republicans will unveil their own HC ideas – will stress private sector solutions - The Republican summit strategy is twofold: to portray the Obama plan as radical and ruinously expensive, while reassuring a potential television audience of millions that the GOP takes the health-care crisis seriously and is prepared to address it headon. Washington Post.

· Health Care – WLP’s Anthem Blue Cross plans to go ahead with rate hikes in California – LA Times.,0,578204.story

· Consumer – cautious article in the WSJ re the outlook for the US consumer – while capital spending is showing signs of improvement and inventories are being rebuilt, “consumers remain reluctant to open their wallets” given high unemployment and the weak housing market – WSJ

· "Concerns grow over China's sale of US bonds" London Telegraph (nothing really new in the article - the headline is a bit dramatic); “Evidence is mounting that Chinese sales of US Treasury bonds over recent months are intended as a warning shot to Washington over escalating political disputes rather than being part of a routine portfolio shift as thought at first”

· Jobs vote to take place Wed in Senate – Senate plans to vote Wed on a $15 billion bill to fight joblessness that offers companies a tax break for hiring people who have been out of work at least 60 days. Bloomberg

· Metals trading – the CFTC will host a meeting 3/25 to discuss if speculators in the base- and precious-metals markets should be subject to trading limits. WSJ

· Treasury announcement on the SFPs – hit on Tues at ~12pmET – takeaways from JPMorgan’s M Feroli: This move does mean there will be $200 billion fewer reserves in the banking system, which could provide a little bit of lift to the effective fed funds rate. As such, it could be seen as a first step in putting the Fed in position to raise rates. Moreover, the minutes from the latest Treasury Borrowing Advisory Council state, "The Treasury, however, retains the flexibility to increase the SFP program, assuming the debt limit is raised and the Federal Reserve requests such an action." Arguing against reading too much policy significance into this move is the fact that the Fed did not make any statement regarding this, and the move could be seen as simply a return to the status quo that existed before the debt ceiling debate interlude. There is also reason to believe that the Treasury's actions were motivated in part to support normal functioning in the bill market. We tend to come down a little more in favor of the latter view, that this should not be read as a shift in policy tone. Ideally, Chairman Bernanke's testimony tomorrow will help clear up some of the confusion that followed from today's announcement.

· Dems say goodbye to Wall St? The securities and investment industry gave 2 to 1 to Democrats in early 2009 but sent nearly half its donations to Republicans by year's end – Washington Post/Reuters

· US architecture billings index down in January; fell 2.9 points to 42.5; fell in January to its lowest level since August 2009 as construction projects kept getting delayed or canceled – Reuters

· The president’s plan to create jobs by pushing the weatherization of homes is falling well short of expectations – NYT

· Obama starting to plot ’12 presidential campaign - President Barack Obama’s top advisers are quietly laying the groundwork for the 2012 reelection campaign – Politico.


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